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| PRKR > SEC Filings for PRKR > Form 10-Q on 15-May-2012 | All Recent SEC Filings |
15-May-2012
Quarterly Report
Forward-Looking Statements
We believe that it is important to communicate our future expectations to our shareholders and to the public. This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, the statements about our future plans, objectives, and expectations contained in this Item. When used in this report and in future filings by the Company with the Securities and Exchange Commission ("SEC"), the words or phrases "will likely result", "management expects", "we expect", "will continue", "is anticipated", "estimated" or similar expressions are intended to identify "forward-looking statements." Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected. Examples of such risks and uncertainties include general economic and business conditions, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key business and sales relationships, reliance on our intellectual property, the outcome of litigation and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
Overview
We are in the business of innovating fundamental wireless technologies. We design, develop and market our proprietary RF technologies and products for use in semiconductor circuits for wireless communication products. Since 2005, we have generated no product or royalty revenue from our wireless technologies. We are heavily reliant on our relationship with VIA Telecom, Inc. ("VIA") since our RF transmit product interfaces directly to VIA's CDMA baseband processors. We are currently working with one of VIA's largest original equipment manufacturer ("OEM") mobile handset customers on the design and test of a handset solution incorporating our technology, the successful completion of which, we believe, will lead to the incorporation of our technology into one or more of this OEM's products. The support of this process is being conducted primarily in Asia and, as a result, requires significant resources in personnel, travel and related costs for our engineering and sales teams.
We are also currently engaged in patent litigation with Qualcomm Incorporated ("Qualcomm") for their alleged infringement of a number of our patents that relate to a portion of our receiver intellectual property. We believe the outcome of this litigation is critical to our ability to generate meaningful revenue from certain of our receiver technologies, and we intend to devote substantial resources to this litigation. The trial is scheduled to begin on August 5, 2013. Although our litigation team is working on a partial contingency basis, we expect to incur significant costs for legal and expert fees related to this litigation.
The following discussion should be read along with the unaudited condensed financial statements included in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on March 30, 2012, which provides a more thorough discussion of our products and services, industry outlook, and business trends.
Liquidity and Capital Resources
As of March 31, 2012, we had working capital of approximately $0.9 million which represented a decrease of approximately $3.6 million from working capital at December 31, 2011. The decrease was due primarily to the use of approximately $3.1 million to fund operations and the investment of approximately $0.3 million in intellectual property filings during the three-month period ended March 31, 2012. Our use of cash to fund operations increased approximately $0.9 million, or 45%, from the three months ended March 31, 2011 compared to the same period in 2012. This increase in use of cash is primarily the result of an increase in litigation related expenses.
On April 18, 2012, we completed the sale of an aggregate of 8,139,050 shares of our common stock, at a price of $1.05 per share, to a limited number of institutional and other investors in a registered offering under our "shelf" registration statement originally filed in September 2009. The offering represented 10.7% of our outstanding common stock on an after-issued basis. The aggregate net proceeds from this offering were approximately $8.3 million, after deduction of placement agent fees and other offering costs.
Our future business plans call for continued investment in sales, marketing, customer support and product development for our technologies and products, as well as investment in continued protection of our intellectual property including prosecution of new patents and defense of existing patents. Our ability to generate revenues sufficient to offset costs is subject to our ability to successfully support our customers in completing their initial product designs incorporating our technologies, our ability to secure a reasonable share of the market through additional product offerings with our current customers and/or the addition of new customers, and our ability to defend our intellectual property.
Our revenue for 2012, if any, will not be sufficient to cover our operational expenses for 2012, and we expect that our expected continued losses and use of cash will be funded from our cash, cash equivalents and available for sale securities of $1.8 million at March 31, 2012 and the $8.3 million in net proceeds from our April 2012 sale of common stock. In addition, we expect that available working capital may be used for initial production start-up costs, including test programs and production tooling and for litigation expenses to defend our intellectual property. We currently have no significant commitments for capital expenditures.
We believe our current capital resources may be sufficient to support our liquidity requirements through 2012; however, these resources will not be sufficient to support our liquidity requirements for the next twelve months without further cost containment measures that, if implemented, may jeopardize our future growth plans, including our ability to support initial production of our products. We believe we may be able to meet future liquidity needs through the issuance of equity securities under our outstanding shelf registration statement or in private placements or through short or long-term debt financing, although there can be no assurance that such financing will be available to us. We currently have no significant long-term debt obligations.
The long-term continuation of our business plan through 2012 and beyond is dependent upon the generation of sufficient revenues from our technologies and products to offset expenses. In the event that we do not generate sufficient revenues, we will be required to obtain additional funding through public or private financing and/or further reduce operating costs. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or further reduce operating costs could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.
Results of Operations for Each of the Three months Ended March 31, 2012 and 2011
Revenue and Gross Margin
We had no product or royalty revenue for the three months ended March 31, 2012
or 2011. We are currently working with one of VIA's largest OEM mobile handset
customers on the design and test of a handset solution incorporating our
technology, the successful completion of which, we believe, will lead to the
incorporation of our technology into one or more of this OEM's products. To the
extent that our technology is incorporated in the form of integrated circuits
supplied by us, additional working capital may be needed in 2012 to support
production start-up costs including test programs and production tooling.
Research and Development Expenses
Research and development expenses consist primarily of engineering and related
management and support personnel costs; outside professional fees including
engineering design services which we use from time to time to supplement our
internal resources and fees related to maintenance of our existing patent
portfolio; amortization and depreciation expense related to our patents and
other assets used in product development; prototype production and materials
costs, which represent the fabrication and packaging costs for prototype
integrated circuits, as well as the cost of supporting components for prototype
board development; software licensing and support costs, which represent the
annual licensing and support maintenance for engineering design and other
software tools; and rent and other overhead costs for our engineering design
facility. Personnel costs include share-based compensation amounts which have
been determined based on the grant date fair value of equity-based awards to our
employees and then recorded to expense over the vesting period of the award.
Our research and development expenses increased approximately $101,000, or approximately 5%, during the three months ended March 31, 2012 when compared to the same period in 2011. This increase is primarily due to increases in personnel and related costs, including travel, of approximately $235,000 and increases in prototype production, materials and related software support costs of approximately $94,000. These increases were partially offset by decreases in outside professional fees of approximately $127,000, and reduced employee share-based compensation of approximately $120,000.
The increase in personnel and related costs is primarily the result of the addition of new employees in mid-2011 and an increase in international travel by our employees related to work with one of VIA's OEM customers for our CDMA-based product during the first quarter of 2012. The increase in prototype production, materials and related software support costs is as result of continued development of our next generation CDMA product. The decrease in outside professional fees is primarily the result of a decrease in outside design services due to timing of certain projects. The decrease in share-based compensation is primarily the result of certain executive and employee RSU awards from prior years becoming fully vested in mid-2011. Although new executive and employee awards were granted in 2011, the grant-date fair value of these new awards is significantly lower than the prior years' awards due to the type of award and the market price of our common stock on the award date.
We expect a significant percentage of our current working capital will be invested in our research and product development activities throughout 2012. However, these expenses will fluctuate on a quarter to quarter basis depending on the timing of various projects.
Marketing and Selling Expenses
Marketing and selling expenses consist primarily of personnel costs, including
share-based compensation and travel costs, and outside professional fees.
Marketing and selling expenses increased approximately $54,000, or 16%, during
the three months ended March 31, 2012 when compared to the same period in
2011. This increase is primarily the result of increases in outside professional
fees of approximately $78,000 and increases in personnel travel costs of
approximately $21,000, partially offset by decreases in share-based compensation
expense of approximately $34,000.
This increase in outside professional fees is a result of outsourced support for a VIA customer in Asia and the initiation of certain public relations activities late in 2011. The increase in personnel travel costs is a result of increased international travel by our employees related to work with one of VIA's OEM customers for our CDMA-based product during the first quarter of 2012. The decrease in share-based compensation is primarily the result of certain executive and employee restricted stock unit ("RSU") awards from prior years becoming fully vested in mid-2011. Although new executive and employee awards were granted in 2011, the grant-date fair value of these new awards is significantly lower than the prior years' awards due to the type of award and the market price of our common stock on the award date.
General and Administrative Expenses
General and administrative expenses consist primarily of executive, director,
finance and administrative personnel costs, including share-based compensation,
and costs incurred for insurance, shareholder relations and outside professional
services, including litigation related expenses. General and administrative
expenses increased approximately $533,000, or 48%, during the three months ended
March 31, 2012 when compared to the same period in 2011. This increase is
primarily the result of increases in outside professional fees of approximately
$454,000, increases in outside consulting fees of approximately $53,000 and
increases in share-based compensation expense of approximately $22,000.
The increase in outside professional fees is primarily a result of litigation-related expenses. The increase in outside consulting fees is a result of a third party engaged in the first quarter of 2012 to analyze our intellectual property landscape for business development purposes. The increase in share-based compensation expense is the result of an increase in share-based compensation related to third-party awards of approximately $95,000, offset by a decrease in employee share-based compensation of approximately $73,000. The decrease in employee share-based compensation is primarily the result of certain executive and employee RSU awards from prior years becoming fully vested in mid-2011. Although new executive and employee awards were granted in 2011, the grant-date fair value of these new awards is significantly lower than the prior years' awards due to the type of award and the market price of our common stock on the award date. The increase in third-party share-based compensation is due to expense recognized upon vesting of RSUs granted to a consultant in November 2011.
Loss and Loss per Common Share
Our net loss increased approximately $698,000, or 21%, during the three months
ended March 31, 2012 when compared to the same period in 2011. This increase is
a result of the $687,000, or 20%, increase in operating expenses, primarily
related to litigation.
On a per share basis, our net loss remained the same for the three months ended March 31, 2012 when compared to the same period in 2011 as a result of a 28% increase in the weighted average shares outstanding for the comparable periods.
Off-Balance Sheet Transactions, Arrangements and Other Relationships
As of March 31, 2012, we had outstanding warrants to purchase 5,352,043 shares of common stock that were issued in connection with the sale of equity securities in various public and private placement transactions in 2000, 2009, 2010, and 2011. These warrants have exercise prices ranging from $0.54 to $56.66 per share, with a weighted average exercise price of $5.27 and a weighted average remaining contractual life of approximately 3.26 years. The estimated grant date fair value of these warrants of $8,649,786 is included in shareholders' equity in our balance sheets.
Critical Accounting Policies
There have been no changes in critical accounting policies from those stated in the Annual Report on Form 10-K for the year ended December 31, 2011.
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